Proposals

In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

A recession is briefly defined as a period of declining economic activity spread across the economy (according to NBER). Under the first definition, each depression will always coincide with a recession, since the difference between a depression and a recession is the severity of the fall in economic activity. In other words, each depression is always a recession, sharing the same starting and ending dates and having the same duration.

A useful example is the difference in the chronology of the Great Depression in the U.S. under the view of alternative definitions. Using the second definition of depression, most economists refer to the Great Depression, as the period between 1929 and 1941. On the other hand, using the first definition, the depression that started in August 1929 lasted until March 1933. Note that NBER, which publishes the recession (instead of depression) dates for the U.S. economy, has identified two recessions during that period. The first between August 1929 and March 1933 and the second starting in May 1937 and ending in June 1938.

Common use of the phrase "The Great Depression" for the 1930s crisis is most frequently attributed to British economist Lionel Robbins, whose 1934 book The Great Depression is credited with 'formalizing' the phrase, though US president Herbert Hoover is widely credited with having 'popularized' the term/phrase, informally referring to the downturn as a "depression", with such uses as "Economic depression cannot be cured by legislative action or executive pronouncement", (December 1930, Message to Congress) and "I need not recount to you that the world is passing through a great depression" (1931).

Due to the lack of an agreed definition and the strong negative associations, the characterization of any period as a "depression" is contentious. The term was frequently used for regional crises from the early 19th century until the 1930s, and for the more widespread crises of the 1870s and 1930s, but economic crises since 1945 have generally been referred to as "recessions", with the 1970s global crisis referred to as "stagflation", but not a depression. The only two eras commonly referred to at the current time as "depressions" are the 1870s and 1930s.

The largest Great Depression of all time occurred during the General Crisis. The Ming Province of China went bankrupt, the nation of Poland ceased to exist, and the Stuart Monarchy was in civil war on three fronts in Ireland, Scotland, and England. Thomas Hobbes, a University of Edinburgh Professor, created the first recorded explanation of the need for a universal Social Contract in his 1652 book Leviathon based on the general misery within society during this period.

This depression is acknowledged to be a worse Great Depression than the later Great Depression of the 1930s. This great depression was ended in the United States by the California Gold Rush and its' ten-times addition to America's Gold Reserves. As with most great depressions, it was followed by a thirty-year period of boom economy in the United States, that we now call the Second Industrial Revolution (of the 1850s).

Beginning in 2009, Greece sank into a recession that, after two years, became a depression. The country saw an almost 20% drop in economic output, and unemployment soared to near 25%. Greece's high amounts of sovereign debt precipitated the crisis, and the poor performance of its economy since the introduction of severe austerity measures has slowed the entire eurozone's recovery. Greece's continuing troubles have led to discussions about its departure from the eurozone.

Several Latin American countries had severe downturns in the 1980s: by the Kehoe and Prescott definition of a great depression as at least one year with output 20% below trend, Argentina, Brazil, Chile, and Mexico experienced great depressions in the 1980s, and Argentina experienced another in 1998–2002. South American countries fell once again into this in the early-to-mid 2010s as a result of falling prices of commodities such as in the 1980s, with the economies of Argentina, Brazil and Venezuela falling into recession as massive government spending further strained their financial situation.

Finnish economists refer to the Finnish economic decline around the breakup of the Soviet Union (1989–1994) as a great depression (suuri lama). However, the depression was multicausal, with its severity compounded by a coincidence of multiple sudden external shocks, including loss of Soviet trade, the savings and loan crisis and early 1990s recession in the West, with the internal overheating that had been brewing throughout the 1980s. Liberalization had resulted in the so-called "casino economy". Persistent structural and monetary policy problems had not been solved, leaving the economy vulnerable to even mild external shocks. The depression had lasting effects: the Finnish markka was floated and was eventually replaced by the euro in 1999, ending decades of government control of the economy, but also high, persistent unemployment. Employment has never returned even close to pre-crisis level.

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